Compound Interest, Or Why You Should Start Investing Now

This is one of those things that a financial adviser tried to tell me at 25, and he was right.

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.

— Albert Einstein

Interest — the fee that is paid for the use of money — is a concept that most adults are familiar with. If you put your money in the bank at 3% interest, that means that the bank will pay you 3¢ for every dollar of yours in the bank, because they use that money for other purposes and track how much they owe you. The reverse is also the case – if you borrow money at 10% interest, for every dollar you borrow, you pay back a dollar and a dime.

That’s simple interest. Compound interest earns you more money still. Consider that bank account that earns 3% interest again, except that this time, it’s compounded quarterly. Every three months, the bank looks at how much you have in that account and deposits 3¢ for every dollar in there. Say you start with $100 in that account. Instead of paying you $3 directly in interest, they’ll put it in the account. Leave it in there for three months, and they’ll pay you 3¢ on the dollar on $103 instead, and you’ll have $106.09. Another three months with no change, and that becomes $109.27.

The reverse is also the case, if you borrow money. If you put $100 on a credit card at 10% interest, your minimum monthly payment might only be 2-3% of the balance. Let’s say we pay a minimum payment at 3% of the balance. The first month, you pay $3, but the interest is 10%. So interest is actually 10% of $97, or $9.70, and that gets added to the total amount you owe. Next month, you’ll owe $106.70.


I paid on it, but the balance went up?! That’s right. Compounding interest can make your balance go up, not down, if you only make minimum payments. That’s why you should always pay enough on any revolving debt to pay all of that month’s interest AND some of the principal. Doing so is the only way you can keep your balance going in the right direction. For installment loans, this math is already done for you in a process called amortization, and the interest on the loan is included in your calculated monthly payment. Credit cards don’t do that, though, and minimum payments can get you into real trouble as in the example above.

As an extreme example of the power of compounding, consider this question. Which would you rather have, a million dollars or a penny doubled daily for 30 days? Go do the math, I’ll wait. (The answer is under the cut tag at the bottom of this post.)

Here’s the trick — making that happen takes time. The more time you have, the more money you get. So, even if you have to start with $5 a week or $5 a month, the earlier you can start, the more time that money has to make more money for you.

The second reality is that banks don’t pay 3% interest. Most of them don’t even pay 1%. It’s garbage, really, because inflation typically runs 2-3% per year. If your money isn’t earning that much, you’re losing value over time. The deal a bank gives you for the use of your money is really crappy. For that reason, I recommend investing any money that you’re putting aside for two years or more – not just retirement, but things like college savings or a down payment on a house or a wedding. That money you put aside earns more money for you while you wait.

But can’t I lose it all in the stock market? you ask. Good question, and the answer is yes, you can, but you have to make some pretty serious investing mistakes for that to be likely over the long haul. I’ll talk about that in Monday’s post.

Continue reading “Compound Interest, Or Why You Should Start Investing Now”

In-app purchases: A rant. 💸💸💸💸💸

I play Game of Thrones: Conquest.

It’s a really fun game.

And I just accidentally made a $99 in-app purchase.

Seriously. $99.

This does NOT make my bank account – or me – happy.

“Sal? How did you accidentally make an in-app purchase?!”

Game of Thrones: Conquest opens to the purchase window. The first thing they display is the big one, for $99. You get all SORTS of useful goodies for that $99. But I never, ever, EVER spend that much in one go on an app. Today, I wouldn’t have even spent $4.99! I try very hard NOT to make in-app purchases. But today, I had my thumb on the button when the app opened, and it took my thumb as intent to purchase. And – AND – it went through, because I wasn’t looking and didn’t cancel fast enough.

Now I’m going through the whole “get the company to refund my money and take back their goodies” thing, and I can’t play my game, lest I accidentally use something I just bought.

The moral: Keep your thumb off the damn button until the app finishes loading! AUGH!

How To Navigate A Grocery Store

How you shop a grocery store depends on what you’re looking for, but no matter what your primary goal in beating the system is, there are tricks to it.

The first and most important rule is to remember that a grocery store’s layout is not by chance. Everything is carefully placed to get you to spend as much as possible on things you don’t need, preferably those items with the most profit margin, since grocery stores have a razor-thin profit margin. CheatSheet lists some of the many ways that grocery stores are carefully planned to get you to spend.

So, here are some tips to help you make the most of your hard-earned dollar in the grocery store.

1. Make A List And Check It Twice

Don’t walk into the grocery store without a grocery list. Before you leave, go through your shelves and your fridge, to see what you have and what you need. Keep an inventory of your pantry to make sure that any needed items get replenished.

This can be done either on paper or on your favorite phone app – of which there are many.

2. Eat Before You Go

Never, ever walk into a grocery store when you’re hungry. Eat out or grab something out of the vending machine at work if you have to. If you do, you’re almost sure to buy things you don’t need. A better choice is to plan a meal at home just before a grocery store trip – you’re shopping full and have already been in your kitchen recently, so you have a good idea (and hopefully have written down) what you need.

3. Coupons and Savings Cards

If your grocery store has a phone app, consider using it. Sure, it helps them, but it also helps you. At the very least, have and use the savings card for your favorite grocery store. You can save quite a bit.

That said, I’ll say this: don’t buy something you wouldn’t ordinarily buy just because it’s on sale. That means you’re falling for the trap of buying things you don’t need just because it looks like a sale. You’re still spending more money than you save in the end, no matter how good the deal.

4. Look Down, Look Down

A grocery store shelf has a plan to it. The stuff at eye level is the most expensive stuff, the stuff the grocery store wants you to buy most. The stuff directly below that is the next most expensive, then the stuff at the top. The best bargains will be on the bottom shelves, including the large bulk containers.

5. Unit Prices Rule

When shopping for food, always look at the unit price to determine the value you’re getting. The retail price tells you how much you’ll spend for that box, but the unit price tells you how much bang is in that buck you’re spending. Usually, the smaller the box, the less bang you’re getting for your buck. When comparing two brands, compare the unit price, not the retail price, because those prices are normalized against a standard unit.

5a. Bulk Isn’t Always A Bargain

Generally speaking, large containers mean you’re paying for more food and less packaging, so the unit prices will be better on large containers. However, if you buy such a large container that you’ll never use it all before it goes bad, you’re throwing your money away on the portion you can’t use. If you only use a small container of milk, don’t buy a big one, because you’ll waste most of it.

On things that don’t spoil, go for the bulk packaging so long as you have the space to store it! Bulk is a great way to get paper products and cleaning products.

6. Cheaper Isn’t Always Better

Yes, that store brand can is 20¢ cheaper than the national brand. Sometimes, that’s a really good deal, but only if the store brand is equivalent quality to the national brand. It isn’t, always. The reality is that store brands can be very hit-or-miss in quality, and an item that is poor quality will need to be doubled up or replaced more frequently – and if that is true, are you really saving money?

Be cautious with off-brands. Try different products in the off-brand, but you’ll find sometimes that the off-brands don’t cut it and you’re actually saving money by spending a bit more on a high-quality product that lasts longer or that you can use less of to get the same effect. My experience tells me that you’re almost always better off with the national brand for these products:

  • Trash bags
  • Toilet paper
  • Paper towels
  • Paper plates
  • Canned peas (off-brand frozen veggies are usually fine)
  • Dishwashing detergent
  • Laundry detergent

7. About Display Placement

You know those displays of various things on the end of every aisle? Those are called end-cap displays, and those are items that the store is being paid to set out in a special place, or things that they want to sell more of. If it’s not on your list, skip it.

Also, have you ever noticed that the candy and/or cookie aisle almost always coincides with some essential that every parent needs? I’ve seen candy across the aisle from peanut butter, bread, fruit juice, and even diapers. Dirty pool, if you ask me – that’s a great way to get a harassed mother shopping with her kids a chorus of screams for candy. This isn’t an accident. As I said above, grocery stores are carefully planned by psychological and marketing experts to encourage you to make impulse purchases. Consider not having the kids (or your SO/spouse) in tow when you grocery shop to avoid this trick.

8. Don’t Hesitate To Ask

Grocery stores are forever moving things around on shelves and reorganizing the store. They also have a nasty habit of placing a key item that everyone buys somewhere that no sane person would ever think to look for it. This behavior is on purpose — it’s intended to force otherwise savvy and organized shoppers to slow down, hunt the shelves, and look at everything on display in hopes of encouraging one or more impulse purchases.

Don’t waste your time or money on this ploy. Find a clerk and ask them where the item you want is to be found. They know the store very well usually and will help you find it without any further fuss.

9. Where The Goodies Are

This is a tip for the health-conscious shoppers. If you’re trying to eat better, the good stuff is around the perimeter of the store. Frozen, dairy, meats, produce — all these items are to be found around the edges of the store. There are a few items in the middle that you’ll want, but by and large, the middle of the store is where you’ll find the junk. Stay to the edges, with a few forays for specific items, and you’ll shop more health-consciously.

One caution, though — the flowers and the baked goods near the door are designed to bombard your senses, so focus on your list and ignore the rest.

10. Groceries Can Be Had Online, Too

There are a number of grocery delivery and pickup services out there, where you can shop online, make your picks from the comfort of your couch, and have it brought to your door for a nominal delivery fee. They don’t always offer all the things you buy, though, so I don’t find that it works for me, but if you’re busy, it can be a godsend.

It can also keep you out of a lot of the head games played by the grocery stores, so if you’re tired, it’s an appealing choice.

11. Don’t Use A Bigger Basket Than You Need

When you have an empty space, the temptation is to fill it. The bigger basket you use, the more you’re tempted to buy. If you’re only going in for a few items, use the hand-carry basket, or seek out the smaller half-carts.

A Final Word

A grocery store can be a minefield of budget-busting choices. Shop mindfully and don’t let yourself get sucked into the head games, and you’ll eat well for less than eating out would cost you.

About Paper Checks

The reality is that the paper check is becoming obsolete as a method of payment. In the 1980’s and 1990’s, every adult had a paper checkbook and kept their records in it. With the advent of electronic payment, check fraud, and cloud-based recordkeeping, fewer and fewer people are opting to keep their records on paper, and fewer and fewer merchants are accepting checks as a method of payment.

What hasn’t changed is that the paper check is still the safest way to send money by snail mail. While the need to do this has decreased significantly, it isn’t zero. Some medical offices and no few government offices still require payment by snail mail, or if they do accept online payment, they charge extra for the service. (I’m looking at you, water and sewer bill.) It’s illegal and unwise to send cash in snail mail, and putting your credit card number on a slip in the mail exposes it to a number of people along the way who don’t need to see it. When you mail it as a check, only the entity written on the TO: line can cash that check, so it reduces the risk of money being withdrawn by someone who doesn’t have the right to do so.

There are also some people, especially older folks, who still use checks. A year or two ago, I was in a grocery store checkout line. The elderly man in front of me had been sent by his wife to the store to get a few things, and she had sent a blank check with him. I have the impression that she’d done all the money management for him, because he didn’t know how to make it out, and neither did the teenage clerk. I stepped in and showed them both how to fill it out, and he went on his way. The clerk told me afterward that she’d never seen one before.

So What Is A Check?

A check is an order to the bank to withdraw an amount of money from the account noted on the check and pay it to the entity in the TO: Line. The video below is a bit dated, but it explains the laws around checks, how they are processed, and how they are used.

Cautions About Using Checks

The video above shows checks being presented in paper to the bank. That isn’t done anymore; checks are now typically presented to the bank electronically as e-checks, which means that instead of clearing in a week, they’ll clear at best immediately or at worst in 2-3 days, unless you’re my water provider because they are archaic and need to be dragged kicking and screaming into the 21st century. What this means to you: if you present a check to someone for payment, you’d better have the money in your account now, not on Friday when you get paid, because it’s presented immediately, and “floating a check” (writing a check now expecting that money will be in your account before it is presented to the bank) doesn’t work like it used to.

Nobody else can sign a check for you. Your bank has your signature on file and will compare the signature on the check image to yours before honoring the check. Any attempt to duplicate someone else’s signature is forgery, and forgery on a check is check fraud. The person who duplicated your signature, and possibly you, can go to jail for that. Protect your signature.

A blank check — that is, a check that has your signature on it, but no amount or pay to: entity written on it, is effectively cash. Treat it as such, and don’t give one to someone you wouldn’t trust with all the cash in your bank account.

If you have a checkbook, as shown in the video above, it should be kept protected. Lock it in a drawer or safe when not using it.

If you write a check, record it immediately in the recordkeeping system of your choice. Paper registers come with the checkbook, but an online recordkeeping system works too. Record the check number, the amount, and the payee; your bank will tell you when they have honored that check, because it will show up in your account. If you record it at once, you won’t forget you wrote it and spend that money elsewhere. Check bouncing is illegal, and it’s UGLY.

Bouncing Checks (Or, Why Good Records Are So Important)

Pay attention to your bank’s policy on how they record withdrawals and deposits. This can be found in the paperwork that came with your checking account, or if you don’t have that, ask any bank teller and they’ll tell you. Many banks record checks before they record deposits, if the two happen in the same daily processing cycle, and quite a few will record the largest check first. Both of these are dangerous, and I’ll take an example to illustrate what can happen.

Say you’ve got $100 in your checking account, and you make an ATM withdrawal out of network for $40. You’ve also written a check for $57, and made an electronic payment for $72. Your bank makes the largest withdrawal first, but an ATM cash withdrawal comes out before any other type of payment (normally the case because it’s cash on the spot). So, both electronic payments land on the same day. The largest one clears first, so the $72 is pulled — but whoops, you only have $60 left so that puts your account in the negative. You’ll pay a bounce fee for that to the tune of $25-$35 per transaction bounced. So when the $57 – that would have cleared if it had been presented first – is presented, it too bounces. So, you’re paying $50-$70 to your bank, and both transactions bounce, putting you in trouble with both entities you paid. Not very nice, is it?

Don’t put yourself in that situation. Keep good records of every transaction, and make sure you can cover every transaction you authorize against that account.

A Final Word

It may be that you’ll never need any of what I just told you — or you might. Chances are you’ll come across a check at some point, even as they fade into obsolescence. If it does, remember this information, and you should be okay.

Smart Ways To Spend A Windfall

They happen every now and then, and they’re oh so fun when they do. Tax refunds. Gambling winnings. Inheritance payouts from a relative’s will. Monetary gifts. If you have escrow on your mortgage, excess from your escrow. These items are referred to as windfall income, a one-time infusion of money from various sources. You can’t count on it happening again, but it’s often in large amounts.

Large or small, it’s very tempting to run right out on a clothes shopping spree or go get that new phone you’ve been eyeing. There are so many things to spend money on, aren’t there? And so many retailers are holding great sales right around tax time.

Not so fast, is my advice.

Especially around tax time, retailers know perfectly well that the majority of Americans get refunds on their income taxes, and their goal is to get you to spend it at their store. The timing of these sales is absolutely not by accident, and the majority of these retailers are selling you things that are nice to have, not things that you really need. Consumerism is rampant in American society, and feeling flush with cash can make it hard not to fall for the carefully-tailored psychological ploys designed to get you to leave it with your favorite store.

Before you and your cash-infused friends hit the mall, consider these other ways to spend your money.

Create (Or Add To) A Rainy-Day Fund

A rainy-day fund is a key part of any responsible and well-managed financial plan. It covers things like an emergency auto repair, dental work, or your bills in the event of a job loss. It keeps you from having to run up your credit cards to handle the budget-busting emergency expenses that are part of life, and keeps you from having a debt-reduction plan derailed by an emergency expense.

This fund should not be confused with savings for planned expenses such as weddings, vacations, car down payments, and so forth. That should be a separate account from this fund.

How much should be in it? That depends on your life situation and your income. Experts recommend starting with a goal of $1000, which is generally enough to cover dental work or many car repairs. My experience says that serious dental work ends up being $1500 or more, so I recommend working up from there. In a perfect world, you’ll have three to six months’ worth of living expenses saved up against a job loss, but that goal takes time to attain.

Start somewhere. If you don’t have a fund at all, open a new savings account with your current bank and start one. If you use the three-account system I mentioned last week, open it at the same institution as your bills account. If you do already have one, consider designating a percentage of your windfall to adding to it.

Invest It

An investment is basically using your money to make more money. It takes a lot of time to build up a lot, but patience and discipline pays off.

Have you started saving for retirement? If not, I recommend getting started. The longer a small amount of money has to grow, the more it becomes. Even if you can’t contribute a lot, contribute something, and give that little something more time to weather the ups and downs of the stock market and become a big something.

If your employer does not offer 401(k) pre-tax retirement contributions, you can still invest post-tax for retirement by contributing to a Roth IRA. You can also invest money for medium-term goals, like a down payment on a house, college savings for a child, or paying for your wedding. There are even mobile apps that allow you to invest small amounts at a time, such as Acorns, Betterment, Robinhood, and Stash.

Pay Off Debt

Got student loans or a car loan? Most loans today allow you to pre-pay all or part of the loan without penalty. Check to be sure that this applies to your loan before you do it, but consider paying off part of that loan. If you pay more now, you’ll end up paying less in interest later because of the way loan amortization works.

How about a credit card? Is it maxed out? If you owe on a credit card, you already spent that money in your hand. Paying off that credit card will help you avoid finance charges and late fees, and a whole lot of worry and headaches.

Take Care Of A Problem

I did this with my tax refund this year. I spent most of it to address a non-working toilet, a non-working sump pump, and some other plumbing problems in my home, and I consider it money well spent. Fix your car. Get it cleaned/detailed. Address any standing problems in your home. Get new glasses. Have your teeth fixed.

Save For A Goal

A down payment on a car. That road trip. A cruise to the Caribbean. That 60″ TV. These are all things that take time and money to work towards, but not usually so long that it’s worth taking the risk of investing it. Shoving some money in a savings account is never a bad idea.

Deal With Taxation

Be aware that some windfalls, particularly inheritances and gambling winnings, may be subject to taxation in your place of residence. If so, consider setting some of it aside to cover that.

A Final Word

None of this is to say that having a little mad money is a bad thing. It’s not. I’m not suggesting that you devote every dime you got to the boring adult stuff. A responsible adult, though, will not blow all of a windfall on fun. They’ll take care of business first and leave a little on the side for fun, instead.

Money Management: The Three-Account System

So you’ve got a bank account. Fantastic. Everyone needs one of those. You might even have a checking account and a savings account. Even better!

That’s the traditional system, and it works if you’re absolutely vigilant about your spending. It can be tough to avoid accidentally spending your bill money on an emergency expenditure, though, and you can make a numbers mistake and have everything bounce on you, which is a fiscal nightmare. I’ve even had a company accidentally double-withdraw me, which if I hadn’t had my ducks in a row could have really messed me up good. The closer to the line you walk financially, and the less cushion you have, the more likely this is to happen.

The traditional system is trouble for people who aren’t good with numbers or who like to act spontaneously. I know a lot of these types of people. Enter the three-account system. Here’s how this works:

You have a checking account with your local financial institution, a bank or credit union that has local branches and ATM’s for your daily financial needs. This account also has a debit card tied to it. This is what you use for your groceries and other day-to-day purchases. If you want to go to the movies or out to dinner, that expense comes out of this account. If you don’t have enough money in the account to go out to dinner, you can’t afford it.

You also have another checking account with a different financial institution, preferably one that does not have a local presence in your town. It might be an online-only bank or an institution that does not have branches in your part of the country. Mine is a credit union based on the opposite coast whose nearest branch is two hours away, but who has a nice suite of online tools. This account’s sole purpose in life is for the payment of your bills. Your rent, electricity, water, phone, car payment, and so forth all come out of this account. You ideally should not have a debit card for this account, and if you do, that card definitely does not belong in your wallet. The goal is to let this account largely manage itself.

The third account is a savings account at the same institution as your bills-only checking account. Its job is to be your rainy-day fund. A rainy-day fund handles large emergency expenses such as a busted hot water heater, a car accident, or emergency dental work. It can also handle your bills in the event of a sudden job loss, but should not ever be used to fund things like vacations. If you want a savings account for fun stuff like vacations or a house down payment, establish another savings account for the purpose. It’s okay to have two or three savings accounts.

Most employers today have the ability to direct-deposit your paycheck, and most of those have the ability to split your paycheck among multiple accounts. To start the system, establish all three accounts, then calculate how much your fixed bills are every month. If your electricity fluctuates, estimate the average for a month. If you want to set aside savings every month towards your rainy-day fund, that counts as a bill. (Pay yourself first.) Have your employer deposit the total amount required for all your bills into your bills-only account, and the balance into your everyday checking account.

💡 When making any financial calculations, round every expense up to the nearest dollar if it’s an expense, and down to the nearest dollar if it’s income. This means your budget accounts for more expense and less income than you really have, and the change becomes a little kitty sitting in the bottom of your checking account. Over time, this little pool can add up to significant savings that can rescue you from a calculation error or a double-withdraw like the one I mentioned at the top of this blog post.

If you block out monthly savings among your bills — and I hope and recommend that you do — you can then set up an automated transfer to tuck that amount away in your savings account every month. Voilà! You’re saving money every month before your I-want-those-shoes urges ever see that money.

I actually deposit a bit extra into my bills account every paycheck. This lets me retain enough money in my bills account that I don’t care when the bills land. They could all land on the same day and I’d still be okay. I have enough stashed in the bottom to handle it. This might not happen for you right away, but if you tuck away a bit extra from your direct deposit, it builds up over time.

A Final Word

The goal of any budget is to ensure that you spend less than you earn, a state of affairs known as “living within your means”. If you treat savings as a bill to be paid every month, you’ll end up living beneath your means, which is even better. It’s not something that most of us can achieve quickly, but small accounts and good habits add up over time.

Protecting Yourself From Identity Theft

I discussed paperwork and protecting paperwork yesterday in my post about finding spaces for things, but how and why to protect your correspondence is a larger topic, and an important one.

What Is Identity Theft/Identity Fraud?

Identity theft/fraud is where someone else pretends to be you in order to steal your money, get a job, credit card, or loan in your name, or steal your government benefits and tax refunds. It can be used to frame you for crimes you did not commit or leave you responsible for purchases you didn’t make.

According to the Federal Trade Commission’s Consumer Sentinel Network Report, consumers reported $905M in total fraud losses in 2017, a 21.6% increase over 2016.The average fraud loss was $429. (Thanks to Experian for compiling this data.)

Your financial identity and life is valuable property that belongs to you and you alone. People who want to steal your money want it very badly.

Let me say that again, to be very clear.

Your financial identity and life are valuable property, and they belong to you and you alone.

Your identity is as valuable and as vulnerable as your grandmother’s diamond ring or your 60″ 4K UHD television. More so, because in this day and age of the Internet, there are a lot more people who have access to sensitive information, including yours, than ever before.

How Do I Stop This From Happening?

It’s impossible to 100% guarantee it’ll never happen. In order to do business, you have to give sensitive information that positively identifies you to everyone with whom you do business. They need it, and they have a legitimate right to know it. As part of their business, they keep databases with everyone’s information in it — and this makes all such entities targets for hacking and theft of personal information.

When you give a business your personal information, you’re trusting them to protect it, and you kind of have to. When that trust is breached, you have a problem. There isn’t too much you personally can do to prevent someone else from being hacked.

The good news is, there are things that you can do to prevent people from targeting YOU for your personal information.

Lock Up Your Paperwork

Your personal paperwork, whether it’s in paper or digital form, should be locked up with strong keys. Your filing cabinet, including your credit cards, identification documents, and checkbook if you have one, should have a combination or key lock on it, and should be located in a place in your home that is not open to visitors and is not readily identifiable from a window.

If you work paperless as more and more people are doing these days, all of your digital records should be on a hard drive that has Encryption at Rest (EAR) enabled. For example, if you have an Apple computer, you should turn FileVault on. For Windows machines, Symantec, MacAfee, and several other companies include EAR as part of their security suite.

If you keep your stuff on the cloud, don’t rely on the provider’s encryption, because if your provider is hacked, that exposes you as well. I’m personally a huge fan of the product BoxCryptor for protecting cloud storage. It encrypts all files and their names on the fly with a strong encryption key that they do not retain — if you ever lose your password, you’ll lose the files forever. This is actually a good thing, because it means that no hacker can get what the company does not have.

Be Awesome With Passwords

Security mavens tell you to use a different, strong, random password for everything you access. Yeah, okay, if you’re eidetic, that might work for you. No normal human can remember that many passwords, and any security expert who is reading this and thinks that’s a reasonable ask needs to be beaten soundly with a reality check.

There are solutions, though.

Generating Awesome Passwords

Take a phrase or a saying or a lyrical line and concatenate it. For example, “This network is too damn secure” might become: tni2ds

However, that still isn’t all that great. You want your passwords to be at least 8 characters long, and a good password will have upper and lower case letters, numbers, and special characters in it. What’s more, every system will have its own requirements for what it will and will not allow. Some will want them longer than that, some might not allow certain characters. So let’s try that again, making the above eight characters and incorporating all character types.


Note that the use of emoticons is a fun way to incorporate special characters into your password!

Don’t ever use your name, your username, a dictionary word, or your birthday as the basis for your password. This subjects you to something called a dictionary attack. Using the concatenation method described above avoids the dictionary attack.

💡You can generate a few passwords and then modify/tailor it for each system. For example, you can generate a password base and then add on a character or word that represents that system. Add some at the beginning, some at the end, some in the middle, vary the character — the passwords are related but different and still possible to track.

Change Them Periodically

How often you change your password is up to you and your life, but you should change your passwords every time a breach on a system you use is reported. This is the value of different passwords for every system — breach of one system gives a hacker no information about any other you might use.

It’s a balancing game – being able to remember all that versus your security level.

Enter my third tip.

Use A Password Locker

A password locker is a program on your computer that is like a database for your passwords. The program itself should use strong encryption such as AES-256 to encrypt the database and should have a browser extension that will auto-fill your password for you. This method allows you to remember one password, have a completely unique password for every system, AND foil a malware program called a keylogger – after all, how can a keylogger record your keystrokes when you’re either cutting and pasting or using auto-fill?

The main danger is that your password locker can become a target, so choose one with strong encryption. Note that some people consider auto-fill a risk as well — it’s up to you. Some of the common ones include LastPass, 1Password, Abine Blur, and Dashlane.

Shred It, Don’t Trash It

Get a good cross-cut shredder and shred any old mail, bank statements, bills, or paperwork that you no longer need. If it contains any of the following, it should be shredded:

  • Your full legal name
  • Your name and address together
  • Your social security number
  • Your driver’s license number
  • Account numbers of any kind
  • Any correspondence from your bank or credit card provider
  • Any correspondence from a government entity
  • Any monetary balances for any account

If you have a fireplace, shredded documents make good firestarters.

Don’t Fall For Phishing

Social engineering – the use of natural human tendencies to maneuver people into helping you achieve a goal – is a pervasive hacker tool to gather information or trick people into installing malware on their machines that allows the hacker to control their computer – a practice known as pharming.

There are tons of resources on the Internet for how to spot phishing and pharming scams. FDIC has a good start, but a few basic rules to keep in mind:

  1. A legitimate outfit will never ask you for personal information by email. They don’t need to — if someone with a legitimate need to know needs access to your account, they can get it without asking you.
  2. A lot of phishers will make threats, try to scare you, or set a deadline for you to act. If you see any of these items, think, because that’s exactly what they’re trying to get you not to do. It’s probably a scam.
  3. Who are you again? If it’s something you’re not expecting or from someone you don’t know, check the headers. If it appears to be from you, is from another country, or otherwise looks funny, it’s a scam. If the headers are missing or incomplete, it’s definitely a scam.
  4. Is the promise too good to be true? Remember: if it seems too good to be true, it probably is.
  5. Do they want something (usually money) up front? If so, chances are it’s a scam.
  6. Never click on a link in an email that you aren’t expecting. Right click or hover over the link to see where it really goes — if it doesn’t match, it’s a scam. Look for misspellings and transposed letters.
  7. Be cautious of attachments. Scan everything before you open it, and if you didn’t expect it, don’t open it at all.

Keep Your Anti-Virus Up To Date

If you don’t have an anti-virus program, get one. If it’s expired, renew it. Update it weekly on a schedule.

WARNING: Think about who makes your anti-virus program. Should you trust an anti-virus made in Russia? Probably not.